The Chancellor should cut stamp duty if he wants to unleash “growth-friendly tax cuts” in his Spring Budget, says the Institute for Fiscal Studies.
The thinktank says that stamp duty on the purchase of property and shares “are particularly damaging and should be towards the front of the queue” for tax cuts, ahead of income tax or headline national insurance rate reductions.
Institute for Fiscal Studies deputy director Carl Emmerson says: “Stamp duties on purchases of properties and shares are the kind of taxes we should be looking to cut, if we have money for tax cuts, and if we want to cut taxes in a growth-friendly way.”
Emmerson was speaking at the body’s presentation of Jeremy Hunt’s options next Wednesday, called ‘Spring Budget 2024: the Chancellor’s options’.
Institute for Fiscal Studies director Paul Johnson said stamp duties on property purchases “gum up the market and keep new and younger people from entering the market,” last month.
He added that stamp duties on shares, meanwhile, “clearly create inefficiencies in the market.”
In former Chancellor Kwasi Kwarteng’s tumultuous mini-Budget in September 2022, stamp duty for FTBs was lifted to £425,000, from £300,000 on a permanent basis.
But in Hunt’s Autumn Statement two months later, he said this uplift would be scrapped at the end of March 2025, in a move that formed part of his bid to stabilise the UK economy at the time.
However, some analysts point out that while stamp duty cuts on homes will further open the market to younger buyers, it runs the risk of pushing up property prices.
AJ Bell head of financial analysis Danni Hewson says: “It’s a well-worn phrase for a reason, an Englishman’s home is his castle, and there are plenty of younger voters desperate to pull up the drawbridge on a home of their own.
“But cutting stamp duty is only one way to stimulate the housing market and as a tool, it’s a particularly blunt one that historically has come with the by-product of higher house prices.”
But overall, the Institute for Fiscal Studies says the Chancellor would do better to hold off on any major tax cuts next week.
It points out that UK borrowing in 2023–24 is now on course to come in at £113bn, which is £11bn less than forecast by the spending watchdog Office for Budget Responsibility in November.
But the thinktank adds: “Despite this, the fact remains that public sector net debt will barely be on course to fall in five years’ time, and only on the basis of plans for fuel duties, business rates and, in particular, day-to-day spending on public services that are unlikely to be realised.
“There is therefore only a weak economic case for another sizeable net tax cut in the forthcoming Budget.”
